ECO100Y5 Lecture 1: PRODUCERS IN THE SHORT RUN

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The shares of the private corporation are not traded on any stock exchange, whereas public corporations are: state-owned enterprise: a firm that is owned by the government. In canada, these are called crown corporations: non-profit organization: firms that provide goods and services with the objective of just often covering their costs. These are often called ngos, for non-governmental organizations. Multinational enterprises (mnes): firms that have operations in more than one country. Mnes playing an increasing role in the ongoing process of globalization. Many government agencies provide goods and services, such as roads and health care; not all production in the economy takes place within firms provided to citizens without charging directly for their use, financed through the government"s tax revenues. Money a firm raises for carrying on its business is called its financial capital firm"s physical assets are called real capital types of financial capital are: equity, debt: Dividends: profits paid out to shareholders of a corporation.

Related Questions

Match Column A with Column B

1) Partnership	a) a business owned by one person who is personally liable for all losses
2) Proprietorship	b) An artificial being created by a state
3) Limited partnership	c) two or more persons combine their efforts for a single transaction
4) Corporation	d) created when shareholders elect to be treates as partners for tax purposes
5) legal capacity	e) created by an agreement between two or more persons who agree to share profits and losses
6) buy-and-sell agreement	f) provides for compensation to a deceased or withdrawing owner of a business in return for that owners interest.
7) Subchapter S corporation	g) the ability of an organization to sue or to own property
8) joint venture	h) exists when some partners are treated like shareholders for liability purposes
9) limited liability company	i) tax doctine that allows income to be taxed at the owner level, not the organization level
10) "pass through"	j) owners recieve limited liability and tax treatment as if they were a partnership without filing as a corporation.

Question 1: Answer the following MC questions...

a).

Samuel F.B. Morse patented the (5 points)

A.	telegraph
B.	automobile
C.	audio recorder
D.	radio transmitter

b).

Your friend wants to open a clothing shop. A necessary capital resource is a (5 points)

	A. place to open the shop
	B. knowledgeable fashion manager
	C. license to conduct business
	D.highway billboard for advertising

c).

Jessica is a violinist who believes she can extend her method of learning music to early childhood education. She opens a preschool in her hometown, using her expertise to form an arts-based program. What factor of production is this? (5 points)

	A. Capital
	B. Entrepreneurship
	C. Labor
	D. Land

d).

Your friend hopes to expand her business to multiple locations. It would be best for her to create a (5 points)

	A. limited liability company
	B. sole proprietorship
	C. corporation
	D. partnership

e).

Root and Vine is a gardening collective and local delivery service started by two friends. Their clientele has grown, and they want to expand. The owners like the idea of protecting their personal property, but they want to maintain control of the business. Which type of organization might best suit their growth? (5 points)

	A. Sole proprietorship
	B. Partnership
	C. Limited liability company
	D. Corporation

f).

An oligopoly is a market for a good or service that (5 points)

	A. has few competitive firms
	B. is perfectly competitive
	C. has one buyer
	D. has one seller

g).

The greatest goal in advertising is to convince us (5 points)

	A. "wants" are unnecessary
	B. the firm has the best price
	C. a particular product is a "need"
	D. the product is the same as other firm's products

h).

"Don't be like John, who had no health insurance when he needed emergency surgery. We make health insurance easy and affordable." This advertisement targets your (5 points)

	A. fears
	B. rituals
	C. emotions
	D. social values

i).

Why do monopolies and oligarchies benefit producers over consumers? (5 points)

	A. Companies control price through demand.
	B. Competition is driven by factors other than price.
	C. Demand influences production more when competition is less.
	D. Few producers can generally control prices.

2.1 Adam Smith is often called the father of economics. His famous book, The Wealth of Nations, talks about an invisible hand which automatically allocates goods to the persons most able to put them to good use. The invisible hand operates through the price mechanism for goods and services, so that individuals who trade on the market, while seeking only their own good, are actually efficiently allocating society's resources.

His ideas, if applied to modern capital markets, imply that these markets would efficiently allocate investment capital to the firms that would use the capital most efficiently in producing goods and services for society. But this would happen only if markets were left to operate without state intervention.

Do you think modern governments should leave capital markets unregulated? Why or why not?

2.2 Consider a business firm, organized as a proprietorship, which has $100,000 invested in assets a bank loan of $80,000 and $20,000 personal capital invested by the proprietor. If the firm becomes insolvent, who is at risk? Why?

2.3 In the following situation, moral hazard or adverse selection may be present. Indicate which you think is present, if any, and explain your choice.

a. An investor is asking for a bank loan to support a new business she wants to operate. She is unwilling to submit to a credit check.

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ECO100Y5 Lecture 1: PRODUCERS IN THE SHORT RUN

ECO100Y5 Full Course Notes

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